Pros and Cons of Joint Home Loans

Qualifying for a home loan on a single salary can be daunting and long in coming for many typical Malaysians. If you can’t wait for your own salary to qualify, one way to improve your eligibility for a loan is to team up with someone with good financial standing for a joint home loan. But do joint home loans live up to the hype?

Pros

Higher Accumulated Income

Banks will consider debt-to-income ratio as a total of all co-signers’ financial standing. Basically, instead of two or more individual evaluations, they will add up all your incomes and debts and consider it as one entity. This is useful if you’re hoping to score better rates, higher chances of approval, or cover up for someone’s poorer credit score.

Higher Success Rate

Of course, no approval is 100% guaranteed, but in general, banks may be more favourable for joint home loans compared to an individual loan. This might be because there are more people who are responsible for repaying the loan. And of course, there’s the aforementioned combined income and income-to-debt ratio factor as well.

Shared Responsibility

In a world where traditional gender roles are breaking down and both spouses work, the idea of splitting financial responsibilities is no longer so far-fetched. With costs of living ballooning as they are, it’ll be a relief to know that you won’t be repaying the house loan by yourself!

Cons

It’s Not for Everyone

That said, not everyone can be a co-signer in a joint home loan. In Malaysia, more than two people can sign up for a joint home loan, but there are conditions: they must be either your parents, siblings, or spouse, and be aged between 18 and 60 years old. All co-signers will also have to be present during all loan-related procedures.

You’ll Co-Own the Property

Hey, everyone needs to emerge a winner if they’re embracing the risk with you, right? As it turns out, the people who sign the loan with you will also own the property with you. This means that they legally get a say when you want to rent out, sell, or do anything with the property, and you can’t just bulldoze ahead when they don’t want to do what you say.

Your Credit Score Can Be Affected

Joint home loan repayments don’t make the distinction between who pays the installments, as long as the installments are being paid. That said, if any one of your co-signers fail to repay their share of the monthly installment, the onus is on you to repay the required monthly sum anyway – or risk having your credit score ruined by the negligence of the other party. As far the bank is concerned, both of you failed to pay sufficiently and/or on time, so both of you will suffer the consequences even though you may have paid your share.

Conclusion

Taking out a joint home loan might seem like an easy ticket to a more valuable piece of property, but remember to consider the flip side of the coin as well before jumping in!